I M F S T A F F D I S C U S S I O N N O T E
March 09, 2011
SDN/11/05
Crisis Management and Resolution:Early Lessons from the Financial Crisis
Stijn Claessens, Ceyla Pazarbasioglu, Luc Laeven, Marc Dobler,Fabian Valencia, Oana Nedelescu, and Katharine Seal
I N T E R N A T I O N A L M O N E T A R Y F U N D
INTERNATIONAL MONETARY FUNDMonetary and Capital Markets Department and Research Department
Crisis Management and Resolution: Early Lessons from the Financial Crisis
Prepared by Stijn Claessens, Ceyla Pazarbasioglu, Luc Laeven, Marc Dobler, FabianValencia, Oana Nedelescu, and Katharine Seal
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Authorized for distribution by Olivier Blanchard and José ViñalsMarch 09, 2011JEL Classification Numbers: G01; G18; G32; G33; H12Keywords: Financial crises; crisis management; resolution;moral hazard; too big to fail; stress tests; assetrestructuring; burden sharing; financial stabilityAuthor’s E-mail Address:SClaessens@imf.org;CPazarbasioglu@imf.org;
LLaeven@imf.org;MDobler@imf.org;
FValencia@imf.org;ONedelescu@imf.org;
KSeal@imf.org
1
We are grateful for guidance provided by Olivier Blanchard and José Viñals, inputs from Luis Cortavarria andvery useful comments from internal and external reviewers, including during an informal discussion at the IMFExecutive Board.
DISCLAIMER: This Staff Discussion
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ote represents the views of the authors anddoes not necessarily represent IMF views or IMF policy. The views expressed hereinshould be attributed to the authors and not to the IMF, its Executive Board, or itsmanagement. Staff Discussion
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otes are published to elicit comments and to furtherdebate.
2Contents PageExecutive Summary ...................................................................................................................1
I. Introduction ............................................................................................................................4
II. What Was Different This Time? ...........................................................................................4
A. Initial Macroeconomic and Financial Conditions .....................................................4
B. The Policy Responses ................................................................................................7
III. Policy Choices And Preliminary Lessons ..........................................................................14
A. The Costs of Crises .................................................................................................14
B. The Policy Choices and Preliminary Lessons .........................................................15
IV. Conclusions........................................................................................................................21
References ................................................................................................................................27
Tables1.
Pre-Crisis Indicators.......................................................................................................5
2.
Selected Asset Relief Measures during Recent and Past Crises ..................................13
Figures1
.
Timing of Interventions and Amount of Liquidity Support ...........................................8
2.
Containment and Resolution Policies ............................................................................8
3.
Monetary and Fiscal Policies during the Crises ...........................................................10
4.
Nonperforming Loans ..................................................................................................12
5.
Cost of Recent and Past Crises ....................................................................................14Box1. Bank Restructuring and Asset Management: Sweden versus Japan ............................19Appendix1. Definitions, Data Sample, and Fiscal Costs of Crises .................................................222. Timeline of Events and Policy Responses ...................................................................233. The "ABCs" of Crisis Resolution and Experience in the Recent Crisis ......................244. Resolution Approaches, Restructuring and Moral Hazard ..........................................26
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